The Credit Card is Dead; Now What Do We Do?

With recent data breaches at Target, Neiman Marcus and other popular merchants, using a credit card for shopping is beginning to seem like a Bad Idea. Near Field Communication (NFC) payment systems like Google Wallet were supposed to make credit cards obsolete, but iOS devices don't support NFC. Even in the Android realm, Google Wallet only works with specific phones. So what can we do?

Enter the Usher Identity Platform from MicroStrategy. This all-software solution promises to overcome the inherent weaknesses of card-based authorization by changing the front-end payment process. Usher is linked to the user's phone and authenticated biometrically. According to the press materials, your credit card number is "dematerialized" and replaced by your mobile identity.

It's all very forward-looking, but can a system like this really work? I certainly had my doubts, so I took an opportunity to interrogate Steve Bruggers, MicroStrategy's VP of Financial Services.

How Would It Work?Rubenking: Here's a very basic question. How do I use Usher to pay for, say, a meal if the restaurant has not installed Usher support?

Bruggers: Just like you cannot use payment, debit or ATM cards at an establishment that is not connected to the appropriate payment or funds transfer network, you would not be able to use Usher at an establishment that does have a connection to Usher. However, it should be noted that an Usher-based payment solution is a software solution and therefore will not require new hardware readers at the retail establishment, as do EMV smart card solutions.

Rubenking: Typically in that restaurant setting I would hand my card to the server (yes, the server could copy my number at that point). I certainly would not hand my smartphone to anybody, so what is the flow? How do I pay for lunch with Usher?

Bruggers: There are several possible flows for using Usher to pay at a restaurant. One flow would be for the restaurant to have a register that can print a QR code on the customer bill. The customer would pay by scanning the QR code with the Usher client on the smartphone. Another flow would be for the server to have a mobile device, integrated with the POS register, that they would bring to the table and the customer would scan a QR code on the mobile device with his phone.

Rubenking: At the grocery I can pull out my wallet, grab and swipe my credit card in one motion, and put back my wallet faster than an old-West gunslinger can draw. How can Usher possibly be as fast and easy as that?

Bruggers: Paying with your phone can be just as fast, and sometimes faster, than paying with plastic. Paying with plastic often requires handing your card to the clerk, who then checks the signature, swipes the card, and then hands it back to the cardholder. Holding the phone up to be scanned can be a quicker, more seamless process. Paying with a mobile device is a natural next step in the continuing process of mobilizing everything we do. Starbucks, for example, is now doing four million transactions a week with their mobile payment app.

How Does It Start?Rubenking: Your website lists many, many use cases for Usher, but none of them matter in the end unless you can get a huge number of people using it. How do you imagine getting past the initial hurdle, where nobody will use it because it doesn't really work until a huge number of people already use it?

Bruggers: The most obvious deployment path for Usher would be as a private-label digital payment card offered directly by the merchant, either as a direct debit or a stored value solution. This is what Starbucks has done with its mobile app and they have seen very large scale and positive adoption by customers. Obviously Starbucks continues to accept plastic credit/debit and cash, as would a retailer using Usher as their private-label payment card.

Consumers will adopt Usher if it gives them a greater sense of trust, is more convenient, delivers a better shopping experience and saves them money (either in offers from the merchant or discounts for using Usher to pay.) That's what the Starbucks experience has proven.

Businesses will adopt Usher if it makes the payment more secure, reduces costs (both losses from fraud and operating expenses) and grows revenue by offering a better and safer shopping experience.

Rubenking: My father simply won't use a smartphone. If restaurants and stores switch over to Usher, will they lose his business?

Bruggers: No, Usher works alongside other payment processes. Just like there are multiple payment options now (credit, debit, cash, check, etc.) Usher would be another alternative.

Biometric PossibilitiesRubenking: On the website I see the word "biometric" over and over, but I haven't yet uncovered exactly what sort of biometric authentication is intended. I'm assuming face or voice, or both, since fingerprint authentication has never passed the "easy" test. Just what sort of biometric authentication is planned?

Bruggers: Potentially any biometrics that can be captured by a mobile device could be used to authenticate identity with Usher. Usher integrates products from biometric vendors. The two primary biometrics MicroStrategy has been working with are voice and face recognition. As biometric methods improve and new modalities become available they all become potential candidates to integrate with Usher.

Will It Fly? I think Bruggers hit the nail on the head with his comment that getting started will require one or more major merchants to buy into the system, using it as private label digital payment system. For customers, it will be just one more app, no big deal to install and use.

I do note that this may not quite be the software-only solution that was promised. Bruggers mentioned "a register that can print a QR code on the customer bill" and "a mobile device, integrated with the POS register." Quite likely either of those would require an investment in new equipment for restaurant use. Payment at the cash register, as in a retail store, will probably be a better starting point.

In any case, this is definitely a good time to promote a payment system that replaces the insecure credit card system. I don't even shop at Target (or Neiman Marcus, for that matter), yet my bank had to issue a new card last week. Short of shopping with cash only, a smartphone solution sounds pretty good.

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